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Transcript

Hello! Friends in our previous class we were discussing about the venture capital. I hope after going through the class on venture capital now you must have developed a sort of self confidence within yourself if you have an idea which is having the potential of being an entrepreneur so that you can go ahead with the venture capital and you can be a successful entrepreneur. You need not worry much about the investment because there are different types of venture capitalist available to support your ideas your innovations. In this class we will be discussing about the corporate social responsibility. When an entrepreneur starts with his venture the basic motive behind that is the maximization of the profit by making use of innovative ideas. And when we enter into the core of the entire process of entrepreneurship it is ultimately profit maximization. He is earning profits from which corners of the society. Obviously, entire his earnings are coming from the society. Now the question arises is ..Is there any responsibility that an entrepreneur has towards the society so that whatever the earnings that he is making out of the product of the society a part of his net earnings should be rolled back for the development of the society, that is what the commitment should be as an entrepreneur so that from where he his earning money and to that particular society he is giving back some part of his earning for the development of the same society. That is what is the area of discussion we are going to have today that is corporate social responsibility. The World business council for sustainable development (WBCSD) tries to expand the term corporate social responsibility as the continuing commitment by the business the person who has enter into this process to behave ethically and to contribute to sustainable economic development while improving the quality of life of the workforce and their families as well as the local community and the society. This is what is the part of commitment the entrepreneur is having for betterment of the society from where he is from and with whom he is working and his followers belong to a particular community and he is working for that particular community and that is what the corporate social responsibility as explained by WBCSD. The CSR can also be explained with the help of this particular simple mathematical equation wherein we say that CSR basically it is the sum of: there are four important issues that we are coming across: the first one is the economic responsibility. What is that? When we say that it is an economic responsibility it is nothing but the profit that you are earning from the society. And the legal responsibility: the legal responsibility….How you are earning the profit? By obeying the laws. It is not that you are not adopting any unethical means of earning the profit. Then you have some ethical responsibilities also so that is what you are being ethical to customers, your end users and that is how you are earning handsome amounts of profit and last but not the least that is the Philanthropic responsibilities that is the Good corporate citizen. So how you can become the good corporate citizen by being a part of, ] effort of CSR. So this is what is a simple equation that we can understand the concept of corporate social responsibility.

Is it that the corporate social responsibility is an innovation of today… no. Since the previous decades since 1950’s or in those decades the concept is in operation. But over a period of time it has seen good number of changes, the modifications. In the decade of 1950’s the concept of corporate social responsibility was known as the corporate social stewardship. The person who is providing the leadership for the betterment of the society and in 1960 the decade of 1960s witnessed as corporate social responsiveness. To what the entrepreneurs are responsive to the social needs. It is not only that they are responsive to their own needs but they are responsive to their own needs also. But in 1980’s, the decade of 1980s has witnessed the CSR as in the form of the corporate ethics or the business ethics. The ethical practices followed by the entrepreneurs were considered as the corporate social responsibility but in the 1990s with the launch of LPG era that is liberalization Privatization and Globalization era the corporate global citizenship came into existence and beyond that we started identifying the similar efforts as the corporate social responsibility.

So now coming to the drivers behind the corporate social responsibility. The first and foremost issue that comes into the picture is the shrinking role of the government. It is not that government is withdrawing from its responsibilities. But as we are having expansion in case of the contributions of the service sector as well as the industrial sector and the agricultural sector also we have seen tremendous growth over a period of time. And at the same time there is increase in population also. With all these things we have seen that the role of the government goes on decreasing over a period of time and the role of the private sector or the corporate sector is increasing. It means when the corporate sector is making lots of business compared to the government sector then the responsibility of the corporate sector also increases so that is where the role of the CSR comes into the picture. Then the second issue is demands for greater the disclosure because there are good numbers of business organizations, the corporate organizations, the entrepreneur venture that we are coming across. So they have to disclose fro where they are getting income at the same time how they are earning profits and how they are contributing for the development of the society or change in the society so that is another factor. Then growing investor pressure: day by day there is increase in the number of ventures that what we are coming across. May it be the small enterprise or the medium enterprise or the micro enterprise, the large enterprises. There are good numbers of enterprises everyday that we are coming out with and government still wants to have the more and more numbers of enterprises that is how they are promoting entrepreneurship also. So that is another important reason of increase the driver for having the corporate social responsibility. Then the competitive markets: as there is higher competition in the market the ultimate beneficiary of the competitiveness is the common man or the end user. Because with an increase in competition so the prices there will be war of the prices and as there is competition among the prices between the different companies the ultimate beneficiary is going to be the end user of the technology or the industrial output. So that is how all these factors are going to act as the drivers for corporate social responsibility.

Now coming to the benefits. What are the benefits? First and foremost benefit is the strengthened brand positioning. Because by entering into the process of this corporate social responsibility you are strengthening your brand. Means you can say that you are part of this particular effort wherein I am rolling back some part of my income to the society and it is enhanced corporate image. It is not that organizations are only earning the money they have some social responsibilities also and increased ability to attract, motivate and retain employees because you are very much concerned about the welfare of the employees. It is not that you are only extracting the work and various other things from them you are rolling back some of the earnings to their benefit also. Then increased sales in the market share because of the CSR efforts because that is ultimately contributing the social benefit. Then increased appeal to the investors and financial analysts. Yes, with that they can come out with social face. Then they can be better competitors in the market. So looking into their income and in the year 2013 the companies act under section 135 it is made mandatory for all those business organizations, the corporate houses and the entrepreneurs to be part of this effort of corporate social responsibility. For which there are certain rules and regulations that are framed so in the simplified form that I would like to put before you. Any venture which is having the net worth of 500 crores or more or any venture or an enterprise which is having the turnover of 1000crores or more or any enterprise or a business organization whose net profit is Rs 5 crore or more. I am talking of the net profit not the gross turnover. When we come to the gross turnover it should be 1000 crore or more. But when it comes to the net profit if it is more than Rs 5 crore so you have to devote to 2% of your net profit for the benefit of corporate social responsibility or to meet out the social needs. So that is what is the commitment under the companies’ act 2013 under section 135.

With this brief background so now let us look into what exactly constitute the corporate social responsibility. How we can implement because when I said 2% of your net income will be rolled back for the benefit of society. So where and how that 2% of the net profit can be made use of. So, that is also defined well defined as the investment should be rupee measurable. It is not that we have enhanced their skills… No, we cannot exactly quantify that thing but in monetary terms we can say that we have constructed this many numbers of toilets, or we have constructed this many numbers of schools or we have distributed this many number of books or whatever it is for the benefits of society so then only it comes under corporate social responsibility. Any effort which is not rupee measurable will not be considered as CSR. That is what is the monitoring agency of the government will be looking for. Then the second condition is it must bring direct benefits to the marginalized, disadvantaged, poor or deprived section of the community. The target groups are not your employees who are working with your organization but the weaker sections of the society, the poorer section of the society so that is what need to be contributed so then only it is considered as CSR otherwise not. If it does not benefit the poor backward sections it will not considered as CSR effort. Then the third prerequisite is it should not benefit only the employees of the company and their families as I have already said if you are contributing for your employees it will not be considered as the corporate social responsibility.

Then the CSR activities must be in the form of projects/programmes for which there are guidelines given by the government institutions. The guidelines says that the activity that you are going to take up as a part of CSR should need based assessment and the base line survey or the study. Before taking up your CSR activities you have to conduct a baseline survey so that you will get the real situation and based on that you will be investing your money. Then you have to clearly identify the time frame. This is the time frame in which that I will be spending that much amount of money. It is not that you started work today and it will continue upto 5 years or 6 years, No. Because every year you will be contributing that particular amount and that has to be made the efficient utilization for that soon. That is how you are identifying the time frame also. Then the specific annual financial allocation has to be mentioned because for the big corporate houses as we have seen in one of our previous discussions so highest numbers of billionaires are in India so now you can think of millionaires also and many people who are coming under that net. So, if they all start contributing 2% of their net profit there is going to be huge amount and it is there. So that is how so there should be specific financial allocation every year for the said project. Then the clearly identified objectives and goal because these things will be evaluated by an independent agency wherein you will be setting the goals as well as the objectives which are measurable by the institutions. Then the Robust and periodic review and monitoring specially by and evaluation and assessment wherever it is possible the third party will be there it means an independent agency will be looking for you investment especially the social investment for the benefit of society whether it is meeting the standards set by the government or not. So on the contrary if you are only philanthropy means you are going giving donations to some organization or institutions it will not be considered as corporate social responsibility.

Corporates are expected to fund projects from their own accounts through the implementing agencies. Funds or the money deposited in the central government accounts will not be considered as CSR. You have to directly transfer the benefits from your account to the beneficiaries account. And the government programmes or initiatives cab be supplemented or complemented because if the government is constructing 100 toilets you can go to the next villages to construct some more toilets or schools or whatever it is so that comes under this thing. And the government program initiative should not be duplicated in the same village if the government has constructed one school you will be constructing another school that will not be considered as CSR. Then the programmes or the projects must be within the country so that is another pre condition if any programmes that you are taking up in any other country that will not be considered as corporate social responsibility. So in a nutshell we can say that so when you are earning your handsome amount of profit from the society some amount will be roll back to the benefit of society for which government has given some guidelines to consider it as corporate social responsibility. With this we are coming to end of today’s discussion and in the next class we will be discussing about the Contract Farming.

Thank You”>